How Have Credit Unions Been Helping Business Start-Ups?

Member business lending has been the fastest growing category of the lending portfolio over the last few years. To what extent have credit unions been assisting new businesses over the years using construction and development loans?


According to the Small Business Administration, the net small firm demand for commercial and industrial loans (those whose demand was stronger minus those weaker in terms of the percentage of survey respondents) stood at -5.3% as of March. This means that of the respondents, a net percentage of 5.3% saw demand for business loans decline in the first quarter of 2007. This measure of loan demand is down 10.6% over the past year, indicating weaker loan demand from businesses.

A Small Fish in the Sea

Banks currently have $1.25 trillion outstanding in commercial & industrial loans, an 11.1% increase over the past year. Although credit unions have a much smaller portfolio at $20.2 billion, they have been growing at a faster rate than that for banks. How did they perform as of the first quarter?



















First Quarter MBL Results

In the first quarter, member business lending remained the fastest growing component of the loan portfolio at an annual rate of 22.0%. This is the slowest annual growth rate of this category in the past five years. Quarterly growth follows the same pattern. First quarter growth stood at 4.1%, the lowest level since 2003. These numbers follow the slowing demand of industrial and commercial loans nationwide.

Developing Local Business

The average loan granted by credit unions to local businesses was $154,176, which includes real estate loans to businesses. Of the member business loan portfolio, 89.3% were real estate loans,10.7% for construction and development, 5.9% for agricultural, 3.3% for purchased participation loans, 1.7% for SBA loans, and 0.4% for unsecured. These add to over 100% due to the overlapping of various categories in this area.

As of the first quarter, 400 U.S. credit unions offered business construction and development loans. The NCUA defines these types of loans as including, “land or structure loans made with the intent of conversion into an income producing property such as residential housing for rental or sale, commercial or industrial use, or similar use.”

Currently, there are $2.2 billion in credit union construction and development loans outstanding. Over the past year, they increased 64.6%, the highest annual growth rate since December 2005. With a quarterly growth rate of 21.9%, the industry had its strongest first quarter since March 2005, when data was first available over this period.

For the first quarter, $287.7 million construction and development loans were originated by credit unions. This is the highest first quarter level since the NCUA began tracking this figure.

Despite the overall slowing of lending for credit unions, construction and development loans have been growing at a very strong rate as credit unions continue to gain confidence in this area. As the economy continues to heat up and the real estate market comes out of its slump, it will be interesting to see how the performance of this category is affected by these outside forces.




June 18, 2007


  • This is very usefull information for all CU Business Lenders. Thank you, Jack.
    Jack Criscuolo
  • I have bad credit and I want open a business I don''t want build A business but I want buy A business did any program can help me with my bad credit. thank you.
    khalid mandour